Why hotels should think of themselves before embracing Facebook and flash sales
by Special Nodes
Before it was the tour operators, now it is online travel agencies that have managed to continue with the same model adapting it to the new ways of doing things.
However, they are not really interested in having innovation break the structure of the market or, at least, are the gatekeepers seemingly deciding where and when such innovation takes place.
Starting this year, the new episode in the series comes in two forms: Expedia has come to an agreement with Groupon, while Booking.com has launched Flash Deals – 50% discounts only for Booking’s fans on Facebook. The page already has close to 200,00 and many hotels have already received a call from Booking.com to participate.
It doesn’t matter how advanced the new social networking platform, online vouchers look, there is nothing innovative about the business model. It’s the same vicious circle:
1. Hotels need clients, many and every day
2. Middleman offers clients and the hotel accepts them happily
3. Clients are never enough. There are many beds, the year is long and the fix costs put pressure
4. Middleman offers more clients in Exchange of more commission and less money
5. The competing hotels also need more clients and they also accept the offer
6. Hotel competition is forced by intermediaries by price lowering and the commission raise.
7. In the short term, this works, it gets them more guests, stolen from the competitors
8. Client base doesn’t grow because the other hotels react and do the same thing
9. The hotel pays more and more to the middleman to find it clients
10. The clients get the message: if they want to book, they have to do it through the middlemen
11. The middleman reinvests the huge commission in marketing and making himself visible
12. The hotel doesn’t invest the same amount to do the same things to promote itself directly
13. The middleman, fed by the hotel, increases his market share
14. The hotel loses market share on direct sales, because it can’t afford the same level of investment
This free-fall operation is as valid now as it was 30 years ago, when the market was dominated by the tour operators, now substituted by the supposedly sophisticated operations of Booking and Expedia.
The Expedia-Groupon vouchers or Booking’s Flash Deals are not going to save any hotel from the free-fall – on the contrary, they are likely to push them down.
In the past, the middleman invested its mark-up in brochures, traditional ads and commissions for retail.
Now, many OTAs use the commissions they get from the hotels to pay for Adwords, SEO and affiliate and loyalty schemes. New names for similar actions.
Great ideas are not that great after all
The middlemen that have been present in this sector throughout the years have always found an innovative excuse to convince the hotel that the next step would be up instead of down. Time has come to prove that the so called technological revolution has only benefited commercially to those more astute middlemen. The hotels, years on, are still as subdued as usual.
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